In early February 1987, Douglas Everett, Chief of Program and Policy in DEA's
Intelligence Section, went to Central America to evaluate allegations linking various
Nicaraguan political organizations to the drug trade. Everett reported to DEA management,
for inclusion in a DEA response to a Congressional inquiry, that after meeting with
personnel from the DEA, the Department of State, and the United States military, as well
as various confidential informants in Central America, he could find no evidence to
support allegations that either the Sandinistas or the Contras as entities were involved
in drug trafficking to support their activities. He reported that although some
individuals associated with these movements may have been involved in drug trafficking,
there was no credible information indicating that the traffickers represented any
political organization or were conducting their criminal activities on behalf of these
groups.

Everett wrote in this report that the DEA's Guatemala office had recently closed an
investigation based in El Salvador in which there had been allegations of Contra
involvement -- an apparent reference to the Grasheim case. Everett reported that,
according to initial informant information, individuals believed to be associated with the
Contra movement at the Ilopango Airport were also engaged in cocaine and weapons
smuggling. He reported that at no time, however, did any informant or Salvadoran official
either see or seize drugs. Everett noted that the DEA Guatemala office believed that the
informants had exaggerated their accounts of activities at Ilopango. He related that some
of the informant reports appeared to have been based on the fact that, on occasion, people
arriving at the airport would leave their plane carrying a briefcase and run to the
military side of the airport before clearing customs. The informants assumed that the
briefcases contained cocaine. Everett noted that, although the informants had reported
drug activity in hangars four and five, those hangars were accessible only to military
personnel and views from the outside were quite limited. Everett suggested that any
smuggling activity at Ilopango was probably being conducted by Francisco Guirola-Beeche,
who was connected to extreme right-wing political groups in El Salvador, not to any
Nicaraguan political factions.

Everett reported that an anti-Sandinista informant had told him that Eden Pastora, the
former leader of the ARDE, was involved in drug trafficking. The informant had complained
that Pastora was making huge profits, but that none of the money was going to the Contra
movement. The informant had related that Pastora, once a member of the Sandinista
government, was now allied with Nicaraguan Minister of Interior Thomas Borge in drug
trafficking activities, and was using cocaine laboratories in Nicaragua. The informant had
claimed that, although Pastora and his associates had been totally corrupted by the drug
trade, the Contras based in Honduras had not yet been.

Everett concluded by noting that allegations concerning Contra links to drug
trafficking, although unsupported by any evidence he could find, would continue to surface
because traffickers who had been arrested would try to avoid prosecution with claims of
CIA authorization.

Several years later, information about drug trafficking at Ilopango Airport arose
again. According to a cable from the U.S. Embassy in El Salvador to DEA Headquarters,
dated January 3, 1989, Salvadoran General Bustillo met with Castillo on December 14, 1988
to discuss Bustillo's suspicions, based on information from some of his own officers, that
Salvadoran Air Force officers were using Ilopango for drug trafficking. Castillo told
Bustillo that the DEA had received similar information, but Castillo noted that DEA lacked
hard evidence because it had not been able to work at Ilopango. Pressed by Bustillo for
names of those suspected by the DEA of drug trafficking at Ilopango, Castillo named, among
others, Air School Director Lieutenant Colonel Manfredo Koenigsberg.

According to the State Department cable, Bustillo said he would do a thorough
investigation of narcotics-related activity at Ilopango and also seek to transfer LTC
Koenigsberg out of the air force as part of normal rotations. Bustillo took this
allegation relating to Koenigsberg and narcotics trafficking to Minister of Defense
General Vides Casanova. When General Vides confronted Koenigsberg, he denied all charges
and demanded to know the evidence against him. Bustillo was called in and asked to provide
proof of the allegations. He was unable to provide any, other than rumors and the
information from Castillo. To back up his charge, Bustillo asked the U.S. Embassy for
whatever evidence the U.S. Government had regarding the involvement of Koenigsberg in drug
trafficking. The Embassy reported that Castillo had given Bustillo the impression that the
DEA was prepared to provide assistance to the Salvadorans, including the assignment of DEA
personnel to investigate drug trafficking at Ilopango.

The Embassy endeavored to give Bustillo the support he needed. Its cable noted:
"In view of Castillo's remarks to Bustillo, Embassy assumes that DEA must have some
concrete evidence (even if it is not up to judicial standards) to support that charge the
Air Force officers, including LTC Koenigsberg, are involved in drug trafficking." The
Embassy asked DEA: "Please inform Embassy ASAP basis of SA Castillo comments."
The Embassy also asked DEA to develop a plan to help the Salvadoran Air Force deal with
the drug problem at Ilopango, but it made clear that the plan was not to be discussed with
the Salvadorans until it had been cleared by the Embassy. The Embassy noted its concern
that "General Bustillo, a very senior player in the Salvadoran political/military
equation, has come to offer his cooperation on the drug problem, and we have made
commitments to him that we will be unable to fulfill."

In February 1989, the CIA Station in El Salvador sent a cable to the DEA with
additional information indicating that the Panamanian Miguel Antonio Rodriguez, a
suspected drug trafficker, was using Ilopango to repair his aircraft; this seemed
suspicious because of the high cost of repairs in El Salvador.

According to a memorandum that DEA Guatemala Country Attache Stia later sent to DEA
Headquarters, Castillo and DEA Group Supervisor Thomas deTriquet had thereafter gone to El
Salvador to investigate this matter, but had been told by a CIA officer that they could
not enter Ilopango to do so. When asked how the DEA was supposed to investigate it, the
CIA officer said it was not necessary, because the CIA had already given the DEA the tail
numbers of aircraft and the names of the people involved. Stia's cable to DEA Headquarters
noted:

On the surface, it would appear as the Station in San Salvador has taken a more active
stance in providing drug information to DEA and relations continue to be good. The fact
remains, however, that Guatemala DEA cannot develop the most important information, that
relating to those allegations and intelligence in regards to Ilopango Air Force Base. It
is [my] intention to have GS deTriquet and SA Castillo meet again with General Bustillo
and request access once again. The results of that meeting will "tell the
story."

Stia also noted in his report that, in March 1989, a confidential source had relayed
information from a subsource close to Salvadoran Air Force officers at Ilopango. The
subsource was at a party of officers when the subject of General Bustillo's drug
investigation had come up. An officer had declared that the whole investigation was a ploy
to throw the DEA off the trail while the Salvadoran Air Force and the CIA ran large
shipments of cocaine through the air bases at La Union and San Miguel in El Salvador for
the purpose of obtaining money for the Contras. (Our search of DEA files found no
additional information concerning this allegation.)

Stia's cable went on to report that a complicating factor in the DEA's investigation
was the hostility of some Embassy personnel toward Castillo, who had gained a reputation
as a man who is always "digging up things." As a result, the Deputy Ambassador
had placed "stringent controls" on the procedures for Castillo's "Country
Clearance," requiring advance notice whenever he traveled to El Salvador. Stia also
imposed "more stringent reporting procedures" on Castillo.

We found no additional cables describing the results of this investigation or
deTriquet's and Castillo's attempts to gain access to Ilopango. DeTriquet told the OIG
what he recalled happening, however. He explained that he had been detailed to Guatemala
in 1989, and while he was there, a reliable informant had told Stia that unidentified drug
dealers were transporting cocaine through hangar five at the Ilopango air base in El
Salvador, using pilots associated with the Contras. DeTriquet said that he and Castillo
traveled to El Salvador to investigate the allegation. They did not have a problem getting
on the military side of the air base, but a Salvadoran security officer had denied them
access to hangar five, which deTriquet believed contained CIA equipment. DeTriquet noted
that he and Castillo had not identified themselves as DEA agents, but had tried a ruse to
gain access, which had been unsuccessful. DeTriquet and Castillo had then gone to the U.S.
Embassy, where the CIA Chief of Station (COS) assured them that there was no drug activity
associated with hangar five. After speaking with the COS, they had not pursued the
allegation any further. Castillo went back to Guatemala, and deTriquet stayed in El
Salvador for approximately three months working with the Salvadoran police to assess if
the DEA needed to establish an office there. During these three months, the allegation of
drug activity at the Ilopango air base never resurfaced. He said, despite the cable from
Stia, he recalled no further meetings with Bustillo.

DeTriquet said that in 1992 the DEA opened an office in El Salvador, and he became the
DEA Country Attache in that office from 1992 until 1995. DeTriquet said that while he was
assigned to El Salvador, he never received information that the Contras or the CIA were
involved in drug activity.

He speculated that perhaps some of the Contra pilots had taken advantage of a situation
and become involved in drug activity, but stated that he did not believe that either the
Contras or the CIA had any such involvement. He said that he had never received pressure
from the CIA in any way concerning a DEA investigation.

We also interviewed other DEA personnel who were in the Guatemala office with Castillo,
and other U.S. Embassy personnel, concerning his allegations about drug trafficking on
behalf of the Contras and the CIA. DEA Special Agent Russell Reina worked in the DEA's
Guatemala Office from 1982 until 1986. He first met Castillo when he arrived at the office
in 1986. At the time, the office had only two agents -- Reina and Castillo -- and the
Country Attache, Stia. The office covered four countries: Belize, Honduras, Guatemala, and
El Salvador. Reina had handled all four countries prior to Castillo's arrival. Castillo
was assigned responsibility for Guatemala and El Salvador when he started in 1986.

Reina said that he and Castillo occasionally worked together, but because of the
shortage of personnel assigned to the office, each usually worked alone in his assigned
areas. Reina said he did become familiar with Castillo's style. He noted that Castillo was
quick to jump to conclusions before conducting an adequate investigation, and that
Castillo treated the leaders of foreign governments with disrespect.

Reina recalled hearing from Castillo that the Salvadoran government had been
enthusiastic about Castillo's investigation of Grasheim, but Castillo later became annoyed
as Salvadoran interest declined. Reina was aware that Grasheim was an American citizen
living in El Salvador, but Reina had no knowledge that Grasheim had any affiliation with
the CIA or the Contra movement. Reina monitored some of the air traffic at Ilopango,
running the tail numbers of small airplanes through the DEA El Paso Intelligence Center
(EPIC), and he recalled that some of the planes had been registered at EPIC for possible
drug involvement. However, he said he did not recall being told by anyone, including
Castillo, that the airport was being used to transport drugs.

Reina said that while he was stationed in Guatemala City, he never worked any cases
jointly with the CIA, but on at least one occasion, he shared an informant with the CIA.
Reina said he and other DEA agents assigned to the Guatemala DEA office met regularly with
other U.S. government officials, including representatives from the State Department and
the CIA, to discuss drug activity in Central America. He said that no one ever asked him
to back off of any investigation.

Reina recalled that Stia, the DEA Country Attache in Guatemala, went out of his way to
assist Castillo even after allegations of unprofessional conduct had surfaced against
Castillo, and that Stia was always supportive of Castillo. Although Reina was not
personally aware of allegations that the CIA had asked Stia to back off the Grasheim
investigation, Reina heard from an informant that Castillo had told the informant that the
CIA had asked Stia to back off the investigation. Reina said the informant did not cite a
reason for the request by the CIA.

DEA Special Agent Larry Holifield worked in the DEA's Guatemala Country office from
January 1988 until 1992. Holifield recalled that Castillo had told him that the CIA and
the Contras were involved in the drug trade to raise money for the Contras, but Castillo
had never provided any proof to substantiate this claim. Holifield said that Castillo
often made allegations without adequate proof on a range of matters. Holifield also noted
that he was the controlling agent for STG6 in 1991, and that this informant had never
indicated that the Contra resupply operation or the CIA were involved in illicit drug
distribution. Holifield also recalled that Stia and Castillo had a good working
relationship, and that Stia went out of his way to help Castillo. Holifield also said that
the CIA had never asked him to back off of any investigations, and that he was not aware
of Stia's being asked to do so either.

DEA Special Agent Delphin Von Briesen told the OIG that he had worked in the Guatemala
DEA office from February 1988 until April 1992. Although he had not been involved in the
Grasheim case, he recalled Castillo's allegations that Grasheim was running drugs and
weapons for the Contras. He said that Castillo had not seemed particularly concerned when
the raid on Grasheim's house turned up only a small amount of drugs. Von Briesen said,
"frankly speaking, the Grasheim case was not considered a big case." Von Briesen
may have heard that small aircraft pilots and couriers used the Ilopango Airport to
transport drugs, but he never received any specific information to suggest a large amount
of drugs were being transported. No one -- including informant STG6, with whom Von Briesen
worked -- ever suggested to him that hangars four and five were being used to transport
drugs or that the CIA or the Contra resupply operation at Ilopango was smuggling drugs
into the United States to raise money for the Contras. Castillo would often assert his
general belief that the Contras were involved in drug smuggling, but never offered any
basis for that belief. Von Briesen said he heard the allegation concerning the CIA and the
Contra drug involvement only after reading Castillo's book, which he said definitely
embellished facts about which Von Briesen had personal knowledge.

Von Briesen said he had never been asked by the CIA to back off of any investigation,
and that the CIA had actually provided information that resulted in some of the drug
seizures by the DEA's Guatemala office. Von Briesen believed that the DEA and the CIA had
a good working relationship, and said he was never aware of the CIA's interfering in any
of the DEA's investigations.

John Martsh, now retired from the DEA, was the Chief of International Programs for
Latin America at DEA Headquarters in the mid- to late-1980s. When interviewed by the OIG,
Martsh could not recall any specific allegations concerning the CIA or the Contras.
However, he noted that he had not been responsible for daily oversight of activity in
Latin American countries, which was the job of staff coordinators working under him. On
Martsh's only trip to Guatemala during this period, no one mentioned any allegations of a
tie between the CIA or the Contras and drug trafficking.

Janice Elmore, now the State Department's Political Military Advisor at the U.S.
Embassy in Sarajevo, was the narcotics coordinator at the U.S. Embassy in El Salvador from
1986 until 1990. She told the OIG that, while assigned to the Embassy in El Salvador, she
monitored the narcotics unit of the Salvadoran police department and gathered narcotics
intelligence information from U.S. law enforcement agencies operating in El Salvador.
Castillo briefed her on several occasions concerning drugs in El Salvador, and made
general allegations that the Contras were involved in narcotics trafficking. But he never
gave her any specific information detailing trafficking patterns or specific individuals
who may have been involved in trafficking, and she had never heard these allegations from
anyone else. Elmore recalled that Castillo had often made allegations that later proved to
be without merit. She noted that it had been rumored that some of the Salvadoran military
pilots were involved in drug trafficking, but that no evidence had been developed to
substantiate that rumor. Elmore said that Castillo never suggested that the CIA and the
Contras were conspiring to traffic in drugs, or that he had received pressure from anyone
to prematurely close his investigation into the alleged trafficking at Ilopango.

The OIG also interviewed an officer from the CIA Station in El Salvador, who worked at
the Station from 1986 until 1988. Previously, he was assigned to Guatemala. He recalled
being introduced to Castillo by SA Reina sometime after Castillo's arrival in Guatemala.
He stated that Castillo had never mentioned anything to him about drug trafficking
involving the Contras. He characterized the allegations of CIA and Contra drug trafficking
as "pure bullshit." He noted that occasional drug trafficking may have been
occurring without his knowledge, but not through "official channels." He said he
had "absolutely no knowledge" of drug activities by the Contras and officials of
the U.S. government, and that, if he had any, he would have immediately reported it to his
superiors, and then to the FBI if necessary. He said that he knew the CIA Chief of Station
well enough to know that he also would have immediately acted on any such information, had
he received it.

The CIA Chief of Station in El Salvador in 1986 refused to be interviewed by the CIA
OIG or by us.

Castillo has alleged that a CIA officer told him that the only way the Contras could
fund their military operations was to sell drugs, and that the CIA employee asked him to
halt his drug investigation at Ilopango.

When interviewed by the OIG, the CIA employee flatly denied both of these claims. He
said that he was a CIA officer in Guatemala from 1985 until 1988, and, in that capacity,
made a number of trips to Ilopango. He said that he had not been aware of any drug
trafficking by Contra pilots at the airport. He recalled that Castillo had informed him
that he was investigating drug activity at the Ilopango Airport, but Castillo had never
mentioned any subjects, and had never discussed any issues relating to the Contras.

Castillo has alleged that the CIA took away the informant -- STG6 -- whom he was using
in connection with his investigation into Contra drug trafficking at Ilopango in order to
obstruct that investigation.

Although Castillo's refusal to be interviewed makes it impossible to be sure, it
appears that STG6 was passed on to Castillo by Robert Calves, a Foreign Service Officer
(now retired) who was Consul General in El Salvador during the mid-1980s. When interviewed
by the OIG, Calves recalled that he developed an informant who had assisted him in closing
down a Chinese smuggling ring operating out of Ilopango Airport, and that he had put the
informant in contact with Castillo when the informant discussed allegations of drug
trafficking at the airport. One day, after the informant had begun working with Castillo,
the informant visited Calves and said that "your people" were involved in drug
smuggling. Calves was unsure whether the informant had been referring to U.S. military
personnel or other U.S. personnel. Castillo later informed Calves that the informant had
related the same information to him, but the informant had also announced that he could
not work with Castillo any longer. Castillo said that he suspected that the informant had
been paid by the CIA not to work with the DEA any more.

When interviewed by the OIG, Country Attache Stia recalled being asked by the CIA
Station Chief in El Salvador to relinquish use of informant STG6. The Station Chief had
explained that the CIA had established the informant before he had ever worked for the
DEA. Because STG6 had neither provided any information resulting in a substantial seizure
of drugs or property, nor had given any reason to believe that he had the immediate
potential to do so, Stia honored the Chief of Station's request. Stia noted that had STG6
been active, he would not have deactivated him. Further, Stia said if there had been a
conflict between the DEA and the CIA concerning an informant, the ultimate decision would
been decided by the administrators of the two agencies. Stia added that after the CIA
stopped using the informant, the DEA reestablished him. Stia said that Castillo never
expressed displeasure to Stia about the loss of STG6.

Stia's testimony concerning the use of STG6 is corroborated by available DEA records,
which reflect that in December 1987, the CIA asked the DEA to stop using STG6 because he
was currently a CIA informant. STG6 was later reactivated by the DEA in 1989, after the
CIA relinquished use of him. He continued providing information to the DEA about drug
trafficking by pilots using Ilopango, although the reports did not indicate that they were
Contra pilots. Reports in his DEA file reference planned undercover purchases from the
Contra pilots, but the files did not indicate that any occurred.

However, despite Stia's claim to us that there was no conflict about the use of STG6,
his April 13, 1989 memorandum to DEA Headquarters states that a "valuable asset (CI)
was denied [DEA Guatemala office] at Ilopango" which was an apparent reference to
STG6.

The CIA OIG has informed the OIG that the CIA officer who handled STG6 refused to be
interviewed by the CIA OIG. The Chief of Station in El Salvador also declined to be
interviewed.

Although Castillo may have had reason to feel aggrieved at the loss (albeit temporary)
of an informant,we did not find that the CIA asserted its authority over the use of STG6
in order to obstruct Castillo's inquiries at Ilopango, particularly since the informant
was subsequently turned over to the DEA.